TDS 195
This query is : Resolved
19 May 2010
Resident Indian pays export commission to NRI Agent for getting the business abroad and also amount is paid directly in dollars?? whether TDS need to be deducted??
20 May 2010
yes.Deduct the TDS on commission
20 May 2010
In view of the substituted explanation to section 9(2), income tax is to be deducted under section 195 subject to the provisions of DTAA if any.
20 May 2010
I do not agree with our friend BC on this interpretation. The substituted explanation to section 9(2) is applicable to clause (v),(vi) (vii) of the Subsection 1 of section 9 . The text of explanation is reproduced as following -
Explanation:- For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not,-
(i) the non-resident has a residence or place of business or business connection in India; or
(ii) the non-resident has rendered services in India.]20
The clause (v), (vi) and (vii) are also reproduced as following -
(v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films; or
(vi) the rendering of any services in connection with the activities referred to in sub-clauses(i) to 2[(iv), (iva) and] (v).
(vii) income by way of fees for technical services payable by-
(a) --------
(b) ----------
(c) --------
From the perusal of the above this is clear that the these three clauses do not apply for commission income of a non resident. Thus as per section 9 the income of a resident by way of commission for procuring the sales order is not treated to deemed to accrue and arise in India, the income will not be taxable in India. In case if in your case the agency commission is for procuring sales order , then no TDS is required to be deducted. CBDT has also issues a circular on this in the year 2005. The text of the same is reproduced here under for your ready reference.
Non-resident agent operating outside the country - As clarified earlier in Circular No. 23, dated 23-7-1969 (see under section 5), where the non-resident agent operates outside the country, no part of his income arises in India, and since the payment is usually remitted directly abroad, it cannot be held to have been received by or on behalf of the agent in India. Such payments were therefore, held to be not taxable in India. This clarification still prevails, in view of the fact that the relevant sections [section 5(2) and section 9] have not undergone any change in this regard. No tax is therefore deductible under section 195 from export commission and other related charges payable to such a non-resident for services rendered outside India.—Circular : No. 786, dated 7-2-2000.
However this circular has been withdrawn during the FY 2009-10, still one can claim that the TDS is not applicable under section 195 on Sales commission as the income is not accruing and arising to non resident in India as per section 9 . Hope, some clarity is achieved on this issue through this reply. In case of disagreement please let me know.
Explanation:- For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not,-
(i) the non-resident has a residence or place of business or business connection in India; or
(ii) the non-resident has rendered services in India.]20
The clause (v), (vi) and (vii) are also reproduced as following -
(v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films; or
(vi) the rendering of any services in connection with the activities referred to in sub-clauses(i) to 2[(iv), (iva) and] (v).
(vii) income by way of fees for technical services payable by-
(a) --------
(b) ----------
(c) --------
From the perusal of the above this is clear that the these three clauses do not apply for commission income of a non resident. Thus as per section 9 the income of a resident by way of commission for procuring the sales order is not treated to deemed to accrue and arise in India, the income will not be taxable in India. In case if in your case the agency commission is for procuring sales order , then no TDS is required to be deducted. CBDT has also issues a circular on this in the year 2005. The text of the same is reproduced here under for your ready reference.
Non-resident agent operating outside the country - As clarified earlier in Circular No. 23, dated 23-7-1969 (see under section 5), where the non-resident agent operates outside the country, no part of his income arises in India, and since the payment is usually remitted directly abroad, it cannot be held to have been received by or on behalf of the agent in India. Such payments were therefore, held to be not taxable in India. This clarification still prevails, in view of the fact that the relevant sections [section 5(2) and section 9] have not undergone any change in this regard. No tax is therefore deductible under section 195 from export commission and other related charges payable to such a non-resident for services rendered outside India.—Circular : No. 786, dated 7-2-2000.
However this circular has been withdrawn during the FY 2009-10, still one can claim that the TDS is not applicable under section 195 on Sales commission as the income is not accruing and arising to non resident in India as per section 9 . Hope, some clarity is achieved on this issue through this reply. In case of disagreement please let me know.
20 May 2010
Hi,
I also not agree with the experts other than Mr.Rajesh Dua. As he also pointed out that to deduct tax at source, income should accrue or arise in india, In your case TDS should not be deducted, as conditions mentioned in sec.9 is not fulfulling, based on the details provided by u.
I also not agree with the experts other than Mr.Rajesh Dua. As he also pointed out that to deduct tax at source, income should accrue or arise in india, In your case TDS should not be deducted, as conditions mentioned in sec.9 is not fulfulling, based on the details provided by u.
29 May 2010
i agree with Mr. warrier
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